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Antero NatGas Output in 1Q Exceeds Expectations

Antero Resources Corp. leaned on completions and ethane recovery to drive production growth well above expectations during the first quarter, filling its firm transportation portfolio and utilizing a robust hedge book to realize a significant price gain on its volumes.

The company said it sold 99% of its first quarter production into favorable markets, compared to 83% in 4Q2015. That operational highlight was driven by the first full quarter of service on M3 Midstream LLC's 1.4 Bcf/d Stonewall natural gas gathering system, which helps moves gas from West Virginia to mid-Atlantic markets (see Shale DailyMarch 1).

Antero said it produced 1.758 Bcfe/d in the first quarter, up 18% from the year-ago period and 17% from 4Q2015. Production consisted of 23% liquids, or 68,516 bbl/d, a 71% increase from 1Q2015 and a 25% increase from 4Q2015. Antero started recovering ethane in December, when the first de-ethanizer came online at MarkWest Energy Partners LP's Sherwood processing plant in Doddridge County, WV. The company produced 11,884 bbl/d of ethane during the quarter.

Earlier this year, Antero said its massive hedge book and strong firm transportation portfolio would afford it protection from a reduced borrowing base (see Shale DailyFeb. 26). It has continued to reinforce its hedge book, having sold nearly all of its forecasted 2016 and 2017 production for what it believes will be a 10 cent/Mcfe premium to New York Mercantile Exchange (Nymex) benchmark prices this year. After hedges, Antero's average realized natural gas price for the first quarter was $4.54/Mcf, a $2.45 premium to Nymex. It earned $14.07/bbl for its liquids during the quarter, or 42% of the West Texas Intermediate average.

The company said it realized a $302 million cash settled natural gas hedge gain and a $23 million cash settled liquids hedge gain during the period. Gas price realizations before hedging were only 1 cent below Nymex during the quarter, "highlighting Antero's ability to access favorably priced markets through our firm transportation portfolio," CFO Glen Warren said. The company's borrowing base was also reaffirmed at $4.5 billion during its spring redetermination.

First quarter well costs in the Marcellus Shale declined 19% from 2015 to $8.5 million for a 9,000-foot lateral. In the Utica Shale, all-in well costs declined 16% during the same time to $10.3 million.

"These lower wells costs were the result of our continued operational efficiencies and our ability to restructure a number of our service contracts that substantially drove down completions costs," CEO Paul Rady said.

Antero focused on completions and turn-inlines during the quarter, finishing 19 horizontal Marcellus wells during the period. It completed 13 horizontal Utica wells. It is currently running seven drilling rigs in the Marcellus and one in the Utica. The company has said that it will work to reduce its contracted rigs to seven this year. Going forward, production could go lower before ramping-up again at the end of the year. Antero has said it plans to exit the year with 70 drilled but uncompleted wells.

Antero had $4.7 billion in debt at the end of 2015, of which $1.3 billion was outstanding under its revolving credit facilities. Including $702 million in letters of credit outstanding, that left the company with $3.5 billion of liquidity at year's end.

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